Boards shielded from activists

Small groups of shareholders will no longer be able to force listed companies to hold extraordinary general meetings under an assault on regulation by the Abbott government.

As part of its so-called “war on red tape", which aims to reduce the compliance burden by $1 billion a year, the ­government will legislate on Wednesday to remove thousands of regulations it says are strangling the business and not-for-profit sector.

One impost to be removed is the ­100-member rule, which enables 100 shareholders to call an extraordinary general meeting, which can cost between $500,000 and $1 million.

Business groups have long fought to abolish the 100-member rule which they claim has been abused by unions, environmental groups and activist bodies such as GetUp!

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Under the changes, such a meeting could only be called should shareholders with a combined 5 per cent stake demand it. “The public’s had a gutful of too much red tape,’’ said Parliamentary Secretary Josh ­Frydenberg. “When it comes to public companies we want rules that advance important public policy objectives like accountability and transparency but do not impose an unnecessary and costly compliance burden. It’s all about achieving a sensible balance between risk and cost.’’

To try and create a cultural change in the public service, guidelines have been issued urging bureaucrats to think twice before imposing new ­regulation. Each new edict will need a regulatory impact statement.

All ministers have written to agencies in their portfolio telling them to cut regulation and threatening senior officials with pay cuts and loss of bonuses if they do not comply.

The Australian Financial Review has obtained a letter that Communications Minister Malcolm Turnbull wrote in December to the Australian Communications and Media Authority chairman Chris Chapman.

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Mr Turnbull acknowledges the ACMA is a statutory body and therefore as minister, “I am cognisant of the ­limitation of my powers of direction to the ACMA".

Cutting compliance burden

However, he then insists the agency “deliver a good proportion of the ­regulatory cost-reduction target which will be agreed for my portfolio in ­coming weeks", and makes good on a pre-election threat by Tony Abbott to tie pay and bonuses to results.

“You should also note that the government intends to link remuneration of [senior] officers, including future pay increases and bonuses, to quantified and proven reductions in red and green tape," the letter says.

“In your capacity as CEO of the agency, you will need to take this into account in your remuneration arrangements with ACMA [senior] officers."

Mr Abbott said government decisions so far to abolish the carbon tax, the mining tax and the Future of Financial Advice regulations had cut the compliance burden for the first year by $350 million, leaving $650 million to go to achieve the $1 billion annual target.

He believed there was enough regulation to provide $1 billion in relief for each year of the government’s first term. Opposition Leader
Bill Shorten
said Labor would respond when it saw the proposals on Wednesday.

“Let’s see what they come up with. If there’s commonsense repeal of some regulations then we’re certainly up for it," he said.

Key stakeholders were surprised but supportive when informed the government had finally decided to abolish the rule which has been in place since the late 1990s.

“A large company has to spend over $1 million to hold a meeting and when it is just 100 people the resolution usually has no chance of success," chief executive of the Governance Institute of Australia Tim Sheehy said.

“We are not trying to quash shareholder democracy because you can still petition to put a resolution on the agenda of an annual general meeting but often 100 shareholders might take one share each simply to push their own agenda," he said.

Resolutions easily defeated

The government’s Corporations and Markets Advisory Committee reviewed the issue in 2012 and called for the rule to be abolished, receiving strong support from major companies including
BHP Billiton
and
AMP
.

Companies such as
Woolworths
have been put to extraordinary cost to hold an EGM, despite easily defeating resolutions such as that proposed by GetUp! to limit maximum bets on pokies to $1 per spin and restrict venue opening times to 18 hours a day. Gas company
Santos
is also facing a resolution, which it says is being led by “extremist activist groups", to be voted on at its annual meeting in May, to end its coal seam gas project in the Pilliga.

The Australian Institute will release a research paper on Tuesday challenging what it says are myths being ­perpetrated by the oil and gas industry about the benefits of expanded CSG production. It is accompanied by polling which shows people want more regulation around CSG.

Chairman of Wilson Asset Management Geoff Wilson, who has been on both the receiving and issuing end of EGMs, said that they had always used the 5 per cent of capital rule to call an EGM which provided a much fairer representation of shareholders.

“If 100 people have a concern then it can be abused," he said. “You can own virtually 0 per cent of the company but still put it to enormous expense.

It has always been overly generous," he said.

A spokesman for the Australian Institute of Company Directors said it was “unreasonable to put corporations and their shareholders to the expense of holding an EGM, especially when the majority of those shareholders are not expected to support the resolutions put forward at the general meeting’’.

Business Council of Australia chief executive
Jennifer Westacott
, who has cited regulation as one of the greatest impediments for business, welcomed the regulation assault on red tape.